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Brokers are playing a greater role in providing access to the private lending market but are being urged to do so with caution.
Private lending is growing rapidly, with brokers playing an increasingly important role in helping borrowers access credit as banks tighten their lending criteria, according to the Mortgage and Finance Association of Australia (MFAA).
Growth is being driven by rising demand, as small and medium-sized enterprises (SME) borrowers pursue more flexible, tailored funding options, while investors look for diversification and attractive returns outside traditional asset classes.
Indeed, asset manager La Trobe Financial recently launched an ASX-listed private credit fund (comprising a balanced exposure to Australian Real Estate Private Credit) that seeks to raise between $100 million and $300 million and provide “a conservative and diversified exposure to private credit, with the convenience of investing via the ASX”.
Private credit, while still making up a small portion of the market, grew at just under 10 per cent in 2024, outpacing broader business lending by 2 percentage points, according to the Reserve Bank of Australia (RBA).
Commenting on the trend, MFAA CEO Anja Pannek said: “Brokers are leveraging private lending solutions to address specific client needs, such as non-conforming loans or funding gaps for property transactions.
“As traditional lenders pull back due to regulatory and economic pressures, demand for credit hasn’t gone away – and that’s where the flexibility of private lending is proving its value.”
However, brokers should apply rigorous due diligence and ensure any recommendations are suitable for their client, the MFAA said.
The MFAA National Equipment and Commercial Finance Forum recommended that brokers assess whether NCCP protections apply and also vet lenders, including their dispute processes and funding stability.
Brokers should also check documentation and watch for hidden fees, one-sided clauses, and rollover conditions.
Ensuring client understanding is also crucial and brokers should explain the risks and lack of consumer protections and get written confirmation, the association said.
If a lender is off-panel, brokers should consult their aggregator, apply extra scrutiny, and seek support.
ASIC sharpens focus on private lenders
The move comes as the Australian Securities and Investments Commission (ASIC) targets private lending as a key priority area this year, citing concerns over potential risks to consumers.
As part of this, the regulator is focusing on a range of lending practices, including whether there are specific business models being used to purposefully avoid consumer credit protections.
ASIC has raised concerns that some private lenders may be operating under models that are “designed to avoid the application of the Code and the National Consumer Credit Protection Act (NCCP) 2009”. The concern is a core part of its legal action against Oak Capital (an allegation that Oak refutes).
Clare George, LMG associate director commercial, said brokers needed to be aware of more scrutiny.
“Education is key. Brokers must go beyond the surface, ask the right questions, and never assume a loan structured as business credit removes consumer protections,” she said.
“ASIC’s focus is increasing, and brokers should expect more oversight. The best way to prepare is to hold yourself to the highest standard.”
[Related: ASIC to target lenders trying to avoid NCCP]
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